Market Data 
- The Pound Sterling declines in the aftermath of the hotter-than-expected UK inflation report for January.
- BoE’s Bailey expects the uptick in inflation won’t be persistent in nature.
- US President Trump threatens to impose 25% tariffs on automobiles, semiconductors, and pharmaceuticals.
The Pound Sterling weakens against its major peers even though the United Kingdom (UK) Consumer Price Index (CPI) report for January showed that inflationary pressures accelerated at a faster-than-expected pace. In the 12 months to January, the headline CPI rose by 3%, faster than estimates of 2.8% and the December reading of 2.5%. In the same period, the core CPI – which excludes volatile components of food, energy, alcohol, and tobacco – grew by 3.7%, as expected, faster than the former reading of 3.2%.
Month-on-month headline CPI inflation deflated at a slower-than-projected pace of 0.1%, compared to the 0.3% growth in December. Economists expected headline inflation to deflate at that pace this month.
Inflation in the services sector, which is closely tracked by Bank of England (BoE) officials, accelerated to 5% from 4.4% in December.
The impact of high inflation data is unlikely to be secularly positive for the British currency. BoE officials have already communicated in their latest monetary policy statement that price pressures could tick higher in the short term due to rising energy prices before returning to their 2% path.
On Monday, BoE Governor Andrew Bailey also said in an interview with BusinessLine that the impact of an expected increase in inflation won’t be “persistent,” and still sees the “gradual disinflation going on”. Bailey added that a “sluggish state” of the economy is also likely to “act against inflation”, Reuters reported.
However, an increase in inflationary pressures is expected to restrict the BoE from further monetary easing.
Going forward, investors will focus on the UK Retail Sales data for January and the preliminary S&P Global/CIPS Purchasing Managers Index (PMI) data for February, which will be released on Friday.
British Pound PRICE Today
The table below shows the percentage change of the British Pound (GBP) against listed major currencies today. The British Pound was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.25% | 0.14% | -0.20% | 0.11% | -0.02% | -0.26% | 0.07% | |
| EUR | -0.25% | -0.10% | -0.44% | -0.13% | -0.27% | -0.50% | -0.18% | |
| GBP | -0.14% | 0.10% | -0.34% | -0.03% | -0.17% | -0.40% | -0.08% | |
| JPY | 0.20% | 0.44% | 0.34% | 0.30% | 0.17% | -0.08% | 0.25% | |
| CAD | -0.11% | 0.13% | 0.03% | -0.30% | -0.13% | -0.38% | -0.05% | |
| AUD | 0.02% | 0.27% | 0.17% | -0.17% | 0.13% | -0.23% | 0.09% | |
| NZD | 0.26% | 0.50% | 0.40% | 0.08% | 0.38% | 0.23% | 0.32% | |
| CHF | -0.07% | 0.18% | 0.08% | -0.25% | 0.05% | -0.09% | -0.32% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Daily digest market movers: Pound Sterling declines against USD, ahead of FOMC minutes
- The Pound Sterling slides to near 1.2580 against the US Dollar (USD) in Wednesday’s European session. The GBP/USD pair weakens as the US Dollar gains, with the US Dollar Index (DXY) rising to near 107.20, ahead of the release of the Federal Open Market Committee (FOMC) minutes for the January meeting, which will be published at 19:00 GMT.
- Investors will focus on FOMC minutes for the January decision to get cues about how long the Federal Reserve (Fed) will keep interest rates steady in the range of 4.25%-4.50%. In the January meeting, the Fed announced a pause in its monetary expansion cycle after cutting interest rates by 100 basis points (bps) in the last three meetings of 2024. Fed Chair Jerome Powell guided that monetary policy adjustments would become appropriate when officials see “real progress in inflation or at least some weakness in the labor market”.
- On Tuesday, San Francisco Fed Bank President Mary Daly also favored a “restrictive” monetary policy stance until she sees a continuation in progress in the disinflation trend.
- Meanwhile, renewed fears of tariffs by United States (US) President Donald Trump have also offered some support to the US Dollar. President Trump said on Tuesday that he plans to impose 25% tariffs on imports of automobiles, semiconductors, and pharmaceuticals, which could increase further over the next year. This could lead to a slowdown in the global economy.
Technical Analysis: Pound Sterling struggles around 38.2% Fibo retracement
The Pound Sterling falls back below the key level of 1.2600 against the US Dollar in European trading hours on Wednesday. The GBP/USD pair faces pressure while attempting to break above the 38.2% Fibonacci retracement, which coincides with the 100-day Exponential Moving Average (EMA), around 1.2620.
The 14-day Relative Strength Index (RSI) struggles to hold above 60.00. The bullish momentum would fizzle out if the RSI (14) fails to sustain above that level.
Looking down, the February 3 low of 1.2250 will act as a key support zone for the pair. On the upside, the 50% Fibonacci retracement at 1.2767 will act as a key resistance zone.
Economic Indicator
Consumer Price Index (YoY)
The United Kingdom (UK) Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. It is the inflation measure used in the government’s target. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.
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